What is the typical consequence of defaulting on a loan?

Defaulting on a loan typically leads to serious financial consequences, one of which is legal action and the potential seizure of assets. When a borrower fails to meet their repayment obligations, the lender may take several steps to recoup the owed money. This can include filing lawsuits to obtain a judgment against the borrower, which could allow the lender to garnish wages or place liens on properties owned by the borrower. In some situations, especially with secured loans (like mortgages or auto loans), the lender may also initiate foreclosure or repossession of the asset that secures the loan. These actions are part of the lender’s efforts to mitigate their losses and are a direct consequence of the borrower’s default.